The Santa Clara City Council changed how it assesses taxes on hotel rooms, shifting from a flat rate to a percent.
At its Tuesday night meeting, the Council unanimously agreed to switch the tourism improvement district (TID) from the current law that governs it to a more modern law that would allow its assessment to yield more money to the city’s general fund.
The TID had previously been governed by a 1989 designation that put $1 per room per night into the City’s coffers. The change to the 1994 law shifts how the City assesses the TID, switching to 1.5 percent of the total value of the room in the first year and jumping to 2 percent during the second year. The district is made up of 11 hotels centrally located in Santa Clara.
“The hotels do see the percentage as a fair process,” said Nancy Thome, Assistant City Manager. “It is really about having the opportunity to generate additional revenue to support ongoing destination sales and marketing efforts, focused specifically on increasing hotel occupancy and overall spending in Santa Clara.”
The change would obviate the City funneling more than $1.5 million annually to fund the TID, instead of giving it the means to support itself.
Erron Hodge, Chair of the TID, said the “future solvency is dependent” on the designation shift to ensure a “long-term sustainable revenue stream.”
Anthony Becker, representative for District 6, said he worried about the shift in the wake of the COVID-19 pandemic, suggesting the Council revisit the topic in six months.
“It is not a good time to be moving to a new model,” he said. “It seems like we are reverting back to what got us into trouble before.”
However, the Council had already kicked the can down the road on the shift, having denied the change earlier in the pandemic. While the newly adopted law would require quarterly budget reports, the terms of the contract are for five years instead of one.
Kevin Park, the City’s representative from District 4, said he would like to have seen a shorter term to give the Council more control. He said raising hotel room costs will not likely generate more money if the City is not providing more amenities for guests.
Despite these concerns from the Council, the motion to adopt the 1994 law and move to a 1.5 percent assessment passed unanimously.
Council To Discuss Dumping Property, Asking For More Money From Franklin Mall Tenants
At the request of Council Member Suds Jain, the Council unanimously agreed to discuss selling the Loyalton Ranch property.
Jain said the property, which yields the City roughly $5,000 a year in grazing fees, is a liability and should be sold.
Mayor Lisa Gillmor disagreed, saying if the City sold the property now, it “would literally be a fire sale,” referring to the recent wildfire that tore through the 40,000 acres.
The item will reappear on an agenda in mid-to-late March for further discussion.
Also at the request of Jain, the Council considered changing how much the tenants of the Franklin Mall pay for the upkeep of the maintenance district in which they reside. Property owners split $15,000 of the $155,000 to upkeep the area, but Jain said the businesses there should be paying closer to $57,000. He called the program that allows the rate an “unfair subsidy.”
City Attorney Brian Doyle said he would need to consult the Fair Political Practices Commission to determine whether the Council can change the assessment made on those in the maintenance district while a Council Member owns property in the district. Mayor Lisa Gillmor’s office is in the Franklin Mall. Gillmor abstained from voting.
Council Member Kathy Watanabe rejected the motion, saying she had “strong reservation” about reassessing how much the tenants pay, calling it a “tax increase.”
Still, the motion to place the item on a future agenda passed 5-1, with Watanabe as the lone “no” vote.
Consent Calendar Spending
The Council also approved the following spending via the consent calendar:
- A $364,096 with ASG Builders to make bicycle lane improvements along Pruneridge Avenue-Lawrence Expressway.
- An increase of the contract with Guidehouse Inc. for North American Electric Reliability Corporation Compliance support from $149,000 to $274,000.
- A $200,000, five-year contract with EOA Inc. for consulting services for stormwater runoff discharge.
- An increase to the contract with Townsend Public Affairs from $90,000 to $252,000 for “legislative advocacy services” through January 2023.
The next regularly scheduled meeting is Feb. 9 in the Council Chambers at City Hall, 1500 Warburton Ave. in Santa Clara.
Members of the public can participate in the City Council meetings on Zoom at https://santaclaraca.zoom.us/j/99706759306; Meeting ID: 997-0675-9306 or call 1(669) 900-6833, via the City’s eComment (available during the meeting) or by email to PublicComment@santaclaraca.gov